Introduction to

Ethics
Difference between personal ethics and business ethics, features of business ethics; What comprises of
unethical behavior in business; Ethical decision making process; Costs and Benefits of managing
ethics in workplace; Ethics in Functional Areas: Operations, Marketing, Finance, HR & I. Technology;
Cases of Corporate Espionage (esp. recent ones), Unethical issues faced by consumers
• Ethics is the branch of study dealing with what is the
proper course of action for a person.
• It is the study of right and wrong in human endeavours.
At a more fundamental level, it is the method by which
we categorize our values and pursue them.
• Do we pursue our own happiness, or do we sacrifice
ourselves to a greater cause?
• Is that foundation of ethics based on religion, or on the
very nature of a person, or neither?

What are Ethics?

Relative term: Ethics is a relative term in the concept of morality and immorality. It
differs from one individual to another or from society to society. What is moral to one
may be immoral to another.
 
Study of Goals and Means: Business ethics is the study of goals and means for the
rational selection of sacred objects and their fulfillment. It accepts the principles of
“Pure goals inspire for pure means” and “Means justifies the end”. It is essential that
goals and means should be based on morals.
 
Different from Social Responsibility: Social responsibility mainly relates to the
policies and functions of an enterprise, whereas business ethics are conduct and
behaviour of businessmen. But it is a fact that social responsibility of business and its
policies is influenced by the business ethics.
 
Greater than Law: Although the law approves various social decisions, but the law is
not greater than ethics. Law is usually related to the minimum control of social customs
whereas ethics gives importance to individual and social welfare actions.

Features of Business Ethics

• Personal Ethics could be defined as what a person
believes to be right.
• This varies from person to person as these are influenced
by culture, beliefs, experience, law and religion.

Personal Ethics
• Business Ethics come into play when the business has to
make a conscious decision on its dilemmas (e.g.:
harassment, employee relations, discrimination etc).
• The set of behaviour and disciple that a business follows
in its activities.
• But as businesses are driven by profit, and as businesses
grow the greed to achieve more increases, which drives
the businesses to fall off its ethical behaviours.
• Recall the Satyam Scam

Business Ethics
• Personal ethics usually influence business ethics, but
there may be a conflict sometimes
• Resolving these conflicts is essential to maintaining a
healthy work-life balance
• Ethical businesses recognize the power of conducting
business in socially responsible ways
• doing so leads to increases in profit and customer
satisfaction and decreases in employee turnover.

Business vs Personal
Ethics
• Business Ethics provide a framework: Like an
individual, business is also bound by social rules and
regulations. Business is expected to restrict its activities
within the limits of social, legal, cultural, and economic
environment.
• Facilitates protection of social groups: Business ethics
gives protection to consumers and other social groups
such as shareholders, employees and the society at large.
• Not against profit making: Business ethics is not against
fair profit making. However, it is against making profit
by cheating and exploiting consumers, employees or
investors.
• Needs willing acceptance: Business ethics cannot be
imposed by law or by force. It must be accepted as self-
discipline by businessmen. It should come from within.
• Theft: Theft at work comes in a variety of forms, and oftentimes employees do not
view it as unethical behavior, believing no one gets hurt by the action. Employees
take home office supplies, use business computers for personal tasks, pad expense
accounts and abuse sick time or allotted personal days. Unethical behavior also
includes having another employee punch a time card, or not punching out for lunch
hours or other non-approved time off.
 
• Vendor Relationships: Businesses that buy from and sell products to other
businesses are sometimes subject to unethical behavior. The practice of accepting
gifts from a vendor in exchange for increased purchasing is not only unethical, it
may have legal repercussions. The same can be said for offering a customer
kickbacks to increase his purchasing habits. Ethics policies often contain guidelines
for giving or accepting gifts with vendors or other business associates, such as a cap
on the value of the gift

What Comprises Unethical

Behavior in Business?
• Bending the Rules: Bending the rules in a business situation is often the result
of a psychological stimulus. If an employee is asked to perform an unethical task
by a supervisor or manager, he may do it because his allegiance to authority is
greater than his need to abide by the rules. Withholding information that can
change an outcome also falls under the umbrella of unethical behavior, even if
the perpetrator believes he is doing what is in the best interest of the business.
For example, if a poor earnings report is withheld until after a stockholder
meeting
• Environmental: Unethical behavior by companies, such as releasing pollutants
into the air, can affect cities, towns, waterways and masses of people. Though
accidents can occur, the release of harmful toxins into the environment due to lax
safety standards, improper maintenance of equipment or other preventable
reasons is unethical. If a business willingly continues production of a product
knowing inherent environmental risks exist, it can certainly be categorized as
unethical behavior.
• Wages and Working Conditions: Other unethical practices include not paying
workers a fair wage, employing children under the legal working age and unsafe
or unsanitary working conditions. Any practices that are not in compliance with
fair labor standards and federal working guidelines fall into this category.
• Abusive behavior: Too many workplaces are filled with managers
and supervisors who use their position and power to mistreat or
disrespect others. Unfortunately, unless the situation you're in
involves race, gender or ethnic origin, there is often no legal
protection against abusive behavior in the workplace.
• Lying to Employees: The fastest way to lose the trust of your
employees is to lie to them. If you ask employees whether their
manager or supervisor has lied to them within the past year, you
may be surprised at the results. Lying is unethical.
• Violating Company Internet Policies: Cyberslackers!
Cyberloafers! These are terms used to identify people who surf the
internet when they should be working. This is a huge, multi-billion-
dollar problem for companies. Who would have thought that
checking your Facebook or Twitter account is becoming an ethical
issue? It is. Violating company Internet policies is unethical.
• Exploiting Workers: Some businesses choose to increase the
profits for the owners at the expense of their workers. Some of
the ways that they do this are arguably unethical, and some are
blatantly illegal.
• Dumping Toxins: Manufacturing businesses may compromise
our health by dumping hazardous waste into the water supply
or by releasing toxins in the air far beyond what is allowed by
law.
• Unnecessary Medical Procedures: Doctors have been known
to overcharge tense patients, demanding unnecessary tests just
to make extra cash

Examples of unethical
behavior in Business
McDonald’s fake customers
In 2008, McDonald’s launched a new Quarter Pounder product in
Japan and, at one of its chains in Osaka, it hired around a thousand
people to queue up outside the store to buy one of the burgers. The
sight of this huge line of people from before the moment of
opening communicated that there was huge demand and excitement
for this new product. The apparent ‘social proof’ for the product
launch encouraged many others to join the queue to see what all the
excitement was about, and also made the news. It was revealed
very quickly to have been artificial popularity
L’Oreal and false eyelashes

In 2007, the Advertising Standards Authority (ASA) ruled that L’Oreal

TV and press adverts which claimed their mascara made eyelashes “up to
60% longer” could be misleading to the public as the model (Penelope
Cruz) was wearing false eyelashes. The ASA instructed L’Oreal to include
a disclaimer in future adverts featuring models wearing false eyelashes
and to ensure any further campaigns for the product made clear that the
"up to 60%" claim referred only to the appearance of lashes. They also
criticised L'Oreal for its lack of promptness in responding to the
complaint.
• State the question, dilemma, or concern as clearly as possible:
Does the statement do the situation justice? Does it make clear
what the problem is and why it's a problem? Does it miss
anything important to thinking through possible courses of
action? Does any part of it get lost in the mists of vagueness,
ambiguity, or professional jargon? Are some of the words
misleading or not-quite-right? Is there anything questionable
about the statement's scope, perspective, or assumptions?. 
• Anticipate who will be affected by the decision: No one lives
in a vacuum. How often do our ethical decisions affect only a
single person and no one else? A client shows up for a session
drunk. Whether the client drives home drunk and kills a
pedestrian can depend on how we define our responsibility.

Ethical Decision Making Process

• Assess whether our areas of competence—and of missing
knowledge, skills, experience, or expertise—are a good fit for this
situation: Are we well prepared to handle this situation? What steps,
if any, could we take to make ourselves more effective? In the light of
all relevant factors, is there anyone else who is available that we
believe could step in and do a better job?
• Review relevant formal ethical standards: Do the ethical standards
speak directly or indirectly to this situation? Are the ethical standards
ambiguous when applied to this situation? Does this situation involve
conflicts within the ethical standards or between the ethical standards
and other (for example, legal) requirements or values?
• Review relevant legal standards: Do legislation and case law speak
to this situation? Are the legal standards clear? Does a legal standard
conflict with other standards, requirements, or values? Would it be
helpful to consult an attorney and obtain legal guidance?
• Consider whether personal feelings, biases, or self-interest might
affect our ethical judgment.
• Attention to business ethics has substantially improved
society.
• Ethics programs help maintain a moral course in
turbulent times
• Ethics programs cultivate strong teamwork and
productivity
• Ethics programs help avoid criminal acts “of omission”
and can lower fines
• Ethics programs promote a strong public image

Benefits of Ethical
Business
Ethics in Functional Areas
The 2008 financial crisis caused critics to challenge the ethics of
the executives in charge of U.S. and European financial
institutions and regulatory bodies. Previously, finance ethics was
somewhat overlooked because issues in finance are often
addressed as matters of law rather than ethics. Fairness in trading
practices, trading conditions, financial contracting, sales
practices, consultancy services, tax payments, internal audits,
external audits, and executive compensation also fall under the
umbrella of finance and accounting. Specific corporate
ethical/legal abuses include creative accounting, earnings
management, misleading financial analysis, insider trading,
securities fraud, bribery/kickbacks, and facilitation payments.

Ethics in Finance
• Human resource (HR) management involves recruitment
selection, orientation, performance appraisal, training and
development, industrial relations and health and safety
issues. Discrimination by age (preferring the young or the
old), gender, sexual orientation, race, religion, disability,
weight, and attractiveness are all ethical issues that the
HR manager must deal with.

Ethical Issues in Human

Resource Management
• Ethics in marketing deals with the principles, values, and/or
ideals by which marketers and marketing institutions ought to
act. Ethical marketing issues include marketing redundant or
dangerous products/services; transparency about
environmental risks, product ingredients (genetically modified
organisms), possible health risks, or financial risks; respect for
consumer privacy and autonomy; advertising truthfulness; and
fairness in pricing and distribution. Some argue that marketing
can influence individuals' perceptions of and interactions with
other people, implying an ethical responsibility to avoid
distorting those perceptions and interactions.

Ethical Issues in Sales

and Marketing
• Misrepresentation and deception
• Excessively high pressure selling
• Unreasonable use of fear tactics
• Demeaning references to race, age, and sex
In all of these cases, these unethical practices involve the
selling process, not the performance of the goods and services
per se

Unethical issues faced by Consumers

• A company must ensure that products and production
processes do not needlessly cause harm. Few goods and
services can be produced and consumed with zero risk, so
determining the ethical course can be problematic. In
some cases, consumers demand products that harm them,
such as tobacco products. Production may have
environmental impacts, including pollution, habitat
destruction, and urban sprawl.

Ethical Issues in
Production
• The theft of trade secrets by the removal, copying or
recording of confidential or valuable information in a
company 

Corporate Espionage
• In what was described as one of the largest cyber attacks,
more than 70 companies, governments, and non-profit
organizations were hacked by spies beginning in 2006,
according to security company McAfee, which didn’t
name the perpetrator in its report. Dell SecureWorks,
another security company, traced the same attacks and
pointed to China as the source of the attacks. Victims
included a U.S. real estate company, a New York media
organization, defence contractors, a South Korean steel
and construction company, the International Olympic
Committee, and the World Anti-Doping Agency. Hackers
took information from some of the victims over a period
as long as two years.
In 2006, in an attempt to ferret out the source of boardroom
leaks, Hewlett-Packard snooped on its directors, reporters,
and employees. The company, the largest U.S. personal
computer and printer manufacturer at the time, sifted
through garbage, set up surveillance, planted spies, and
hired investigators who posed as company directors and
reporters in order to obtain phone records.

HP board Chairwoman Patricia Dunn, who is believed to

have approved the spying, and a dozen top officials were
fired. In the end, HP paid $14.5 million to settle an
investigation by California’s attorney general, $6.3 million
to settle shareholder’s lawsuits, as well as an undisclosed
amount to journalists at The New York Times.
• In a January 2010 blog post, Google disclosed that it
detected the previous month a highly sophisticated cyber
attack originating from China that resulted in the theft of
its intellectual property. The company said evidence
suggested that a primary goal of the attackers was to
access the Gmail accounts of Chinese human rights
activists. Google said a wide range of companies were
also targeted, including those in the finance, technology,
media, and chemical industries. "This is a big espionage
program aimed at getting high-tech information and
politically sensitive information,"